Monday, July 18, 2011

Watching the Debt-Ceiling Watchers

I don’t know about you, but I’m finding these interminable debt-ceiling negotiations more tedious by the day. But it's still pretty interesting watching liberals watch them. What they see is a function of where they think the action is and their psychological investment in the personal fortunes of Barack Obama. Consider two accounts of what’s going on from center-left observers:

Bryan Jones is focused on the poker game between Obama and John Boehner in their private communications. And he’s concluded that Obama has played his cards so well that Boehner has already folded a winning hand:

“It is always possible that Obama will capitulate to a ‘cuts only’ strategy, but that is (and probably always was) highly unlikely. Indeed, he has increasingly bound himself to a ‘balanced plan’, including spending cuts and revenue increases, an option that polls extremely well among Americans. It has dawned on Republicans, and on Democrats as well, that Obama’s victory is more likely to be a rout than a Democratic surrender. The best Republicans can hope for, absent a change of mind among their radical wing, is to be blamed for playing games while the economy deteriorated.”

Ezra Klein thinks the real action is in the Senate, where if you look hard enough, you can see the final deal in rough outline emerging from the negotiations between Harry Reid and Mitch McConnell It looks to Klein that the deal about to emerge will signal a pretty substantial Democratic capitulation:

“We seem to be coming closer to a deal on the debt ceiling. It begins with the McConnell plan, in which the debt ceiling is raised three times between now and November, and each time, Republicans are able to offer a resolution of disapproval. Then it adds in $1.5 trillion in spending cuts harvested from the Biden talks. Then it creates a committee of 12 lawmakers charged with sending a deficit-reduction plan to Congress by the end of the year. Whatever they decide on would be protected from the filibuster and immune to amendments.

“For Republicans, this plan is something close to the best of all possible worlds (sorry, but I do not consider a world in which "Cut, Cap, and Balance" passes to be a possible one): It's all spending cuts and no revenues. It's a little plan that denies the Obama administration the political and substantive benefits of a big plan. It's a multi-part plan -- which is more important than people realize -- that forces Democrats to take three hard votes between now and the election, and almost ensures that deficit reduction will be an issue in 2013 and beyond. . . . As for the Democrats? Well, it's a deal.

How can two smart liberals look at substantially the same facts and see such different-looking things? That’s easier to understand if we remember that what’s good for Obama needn’t be so great for Senate Democrats and vice versa.

Let’s stipulate that Obama has played his cards well enough so that, if a default or serious disruption in the way the federal government pays its bills occurs, Republicans will get the lion's share of the blame. Jones thinks that means the Democrats must be winning the debt-ceiling contest because Obama has made himself look statesmanlike enough that Republicans now need a debt-ceiling deal more than Democrats.

Yet appearances can be deceptive. Indeed, in at least one respect Democrats are the ones more in need a debt-ceiling deal. Before the debt-ceiling negotiations they were caught between a rock and a hard place. Their base will hold it against them if they agree to entitlement cuts necessary to look serious about getting a handle on the deficit and independents will hold it against them if they don’t. Striking a deal with Boehner providing for $1 of increased tax revenues for every $3 of spending cuts solved that otherwise intractable problem by enabling Democrats to make a serious play for independents without their base holding it against them too strongly because the Republicans had a gun to their head over raising the debt-ceiling. Having the deficit and tax issues rolled into a single grand deal solves the Democrats’ most pressing political problem and creates an intractable one for Republicans trying to reconcile their big business and Tea Party constituencies.

Republicans, however, are in a position to insist that the deficit and tax issues be decided serially, with the deficit issue coming up first, as long as they’re willing to pass a debt-ceiling increase that isn’t matched by dollar-for-dollar spending cuts. That won't repell either independent voters who aren't exactly thrilled at the idea of entitlement cuts or a Republican base that's already convinced that more spending cuts aren't worth a noticeable tax increase. That pushes Democrats right back into the corner they started from, a place from which their best option is to accept spending cuts that are substantial-looking enough to impress independent voters without throwing in the towel on entitlements. That explains why the deal that Klein is envisioning might be looking better all the time to Democrats and Republicans alike, too good to make either side roll the dice on not reaching a debt-ceiling agreement.